Bloomberg Intelligence’s senior macro strategist, Mike McGlone, is sounding a cautionary note on the value of Bitcoin (BTC) as the cryptocurrency navigates a shifting monetary policy landscape. In a recent Understanding Macro interview, McGlone highlighted the challenges facing Bitcoin, which has matured during an era of historically low-interest rates and is now encountering an environment of rising interest rates.
McGlone suggests that Bitcoin is currently in a “process of reverting” in response to these changes. One of the key factors contributing to this shift is the Federal Reserve’s ongoing tightening of monetary policy, a move that could impact risk assets like Bitcoin.
He explains, “The key thing is 800-pound gorilla… the Federal Reserve is still tightening. So I think this process of reversion is in place.” Historically, when interest rates rise, risk assets like Bitcoin often experience downward pressure, as they become less appealing to investors seeking safer options with potentially higher returns, such as government bonds.
McGlone warns that Bitcoin’s price could potentially decline by more than 5% from its current level, possibly triggering a broader flight from other risk assets. He cautions, “I think it’s at risk of dropping below $25,000 and taking everything risk with it.”
Regarding Bitcoin’s future trajectory, McGlone draws a parallel with the excessive price surges seen in other assets, including Amazon’s stock. He suggests that Bitcoin’s role as a leading indicator could persist, and at some point, it may evolve to trade more like traditional safe-haven assets such as gold and treasury bonds.
He notes, “The pump in the price [of Bitcoin] was excessive. And we’ve seen that in Amazon [online retailer’s stock]. We’ve seen that in all risk assets, and I think it’s still going to be the leading indicator. At some point, I think it’s going to turn around and trade more like gold and treasury bonds… we’ve had a bounce this year and it’s starting to roll back over.”
As of the time of writing, Bitcoin is trading at $26,778. McGlone’s cautionary stance adds to the ongoing debate surrounding Bitcoin’s price trajectory and its ability to navigate changing market dynamics in the coming months.